Clean beauty is prevalent abroad, but the response in China is mediocre.

Will it get harder in the last 4 months? Recently, according to Shanghai Jahwa's 2022 semi-annual report, the company achieved operating revenue of $544 million, down 11.76% year-on-year; net profit attributable to the mother company was $23.15 million, down 44.84% year-on-year. Not only Chinese companies, but also international beauty giants experienced a decline in performance. According to CHAILEEDO statistics, from January to June this year, the global beauty giants Natura & Co, Johnson & Johnson and Shiseido all experienced different degrees of decline in performance, with Natura & Co experiencing the largest decline of 10.6%. At the same time, the average growth of the ten companies in the first half of this year fell 13.88 percentage points from 19% in the same period last year. It is worth noting that when the end demand declined, the cosmetic upstream factories and packaging material companies also did not feel good. On the factory side, in the first half of this year, Cosmax's global revenue was 4.158 billion yuan ($609 million), and while it achieved a 3.56% growth, China revenue was 1.56 billion yuan($229 million), down 6.6% year-on-year. In addition, the domestic head OEM/ODM Nox Bellcow's parent company, Fujian Green Pine Co., Ltd., forecasted net profit for January-June 2022 of -170 million yuan (about -$24.91 million) to -130 million yuan (about -$19.05 million), down 194.12% to 171.97% year-on-year, according to an earnings preview. "It's not optimistic, the performance has dropped by at least one-third since the outbreak in Shanghai." The head of R&D of a color cosmetics factory in Guangdong revealed. "The performance in the first half of this year was indeed affected to a certain extent, and the overall business had a drop of about 20-30 percent." The founder of a cosmetics foundry told CHAILEEDO. The same is true for packaging material companies. As a packaging material supplier for well-known domestic and international cosmetic companies such as Estee Lauder, L'Oréal and Shanghai Jahwa, Zhejiang Jinsheng New Material's operating income in the first half of this year dropped 2.18% year-on-year, and net profit attributable to shareholders of listed companies fell 79.09% compared with the same period of last year. For most of the cosmetic companies' performance decline, many industry players believe that the decline and shrinkage in the consumption level caused by the global economic downturn and the direct impact caused by the epidemic are the main reasons. According to data released by China's National Bureau of Statistics, from January to July this year, total retail sales in the cosmetics category amounted to 216.1 billion yuan ($31.664 billion), down 2.1% year-on-year. In addition, from January to July, China's national online retail sales amounted to 7,322.4 billion yuan ($ 107,926 million), up only 3.2 percent year-on-year. Luo Yun, founder of Shanghai Xianji Biotechnology Co., Ltd., said, "At present, consumption momentum and expectations at the consumer end are being adjusted downward, and categories like color cosmetics are still more obviously affected by consumption expectations. The listed brand companies' expectations are adjusted downward, and the upstream packaging and raw material companies will adjust accordingly." In addition, at the beginning of this year, the epidemic affected two major industrial gathering places in Shanghai and Guangzhou one after another, and the pressure on the supply chain, logistics and storage was unprecedented. The above mentioned whether Estee Lauder, Shanghai Jahwa or Cosmax, etc., are based in Shanghai, and the factory shutdown, logistics shutdown, resulting in corporate performance ultimately did not meet expectations. The data from listed companies is more straightforward. Shanghai Jahwa said in its earnings report that its beauty warehouse was completely sealed and controlled during the epidemic, and as a result, its skin care revenue fell 34.84% year-on-year in the first half of the year. Jinsheng New Material pointed out in its earnings report that the Shanghai subsidiary's sales staff visiting customers to conduct business was affected in the second quarter due to the need to prevent and control the epidemic, resulting in a decrease in orders. Overall, affected by the domestic and international epidemic and the macro economy, the company saw a decrease in orders and revenue to varying degrees in the first half of 2022. In addition, many industry players believe that the global cosmetic raw material supply chain crisis has led to price increases for many raw materials, and for companies that rely on imported raw materials, strict customs import controls and longer lead times for incoming goods have made raw material costs infinitely higher, which has also led to a decline in business performance. "Many upstream packaging companies net profit fell, mainly due to the bulk of raw material price increases. Due to the decline in demand, many packaging material companies have not implemented price increases for customers, but constantly compress profits. This led to the entire upstream, regardless of sales growth or decline, profits have been greatly affected." The above-mentioned package material enterprise responsible person pointed out. Shanghai Jahwa, for example, in the second quarter of this year, the company's average purchase price of soap noddles, surfactants, packaging rose by a minimum of 0.6% year-on-year, the highest increase of 59%. "The first half of the year suffered the biggest impact since the epidemic, the second half of the year may be more difficult." Many industry participants said that the socio-economic downturn, epidemic prevention and control and other uncertainties, will affect confidence. The above-mentioned person in charge of the packaging enterprises said that the economic environment is bad, consumer power is down, consumers' two-for-one products stocked up in last year should not have been digested. For this year's double 11, most brands have not held much hope, so the second half of the year is not estimated to be good. It is worth noting that, based on the performance of the first half of the year, many companies have lowered their performance targets this year. For example, Shanghai Jahwa has lowered this year's target to 7.5 billion, and the 10 billion revenue plan for 2023 has been temporarily overturned. Estee Lauder expects net sales for the next quarter to fall 10%-8% year-on-year. However, Luo Yun said that under the epidemic, although categories such as color cosmetics have been affected to a certain extent, there are some categories, such as sunscreen and whitening products are very popular, in terms of use cycle and intensity, are greatly enhanced. In addition, offline consumption is slowly recovering, and consumer confidence is coming back. He pointed out that, "Uncertainty may be pointed to the second half of the epidemic prevention and control. I hope there is no longer a large-scale closure and control, otherwise there will be a large impact on the supply chain and production." Economic downturn, epidemic, rising raw materials..... For cosmetics companies, 2022 will undoubtedly be a tough year. But no matter what, no confidence should be lost.

ABSTRACT: On July 26th, Stila, an American beauty brand, announced in its Tmall flagship store that its overseas beauty flagship store would cease operation at 18:00 on July 26th. Along with the overall consumption upgrade of Chinese consumers and the growth of Chinese e-commerce platforms, recent years have witnessed overseas niche beauty brands flocking into China, with shops on e-commerce platforms becoming their top choice. But since the second half of 2021, social media is always reporting cosmetics clearance and the closedown of some brands' Tmall stores, with several stores selling niche imported beauty products having been closed or entering the countdown of their closedown. The eyeshadow palette of UrbanDecay and the Huda beauty, and liquid eyeshadow of Stila were once all the rage because customers had to offer higher prices to secure them from purchasing agents, said many a consumer. But now they are available via some unofficial stores at prices around $ 100. It is understood that most of these products of clearance sales by online distributors are products nearing their expiration date. Stila also announced the closure of its flagship Tmall store on July 26 after clearance sales for some time. Purportedly Stila entered the Chinese market in 2022 as its products were already selling like hotcakes in the purchasing-through-agency market. And many products like eyeshadow, Skin Tone Correcting &Brightening Primer, highlighter, and All-in-one Color Correcting Palette are hot-selling due to kol's recommendation. It took Stila only two years to go from a demand-exceeding-supply boom to sales clearance and end up with eventual closedown. And these two years also happened to witness the rapid development of domestic beauty brands in China, with the number and categories of brands increasing exponentially. According to the 2021 Research Report on National Cosmetic Industry's Region released by Qixin.com, the number of new cosmetics enterprises in China has increased year by year over the past decade. In 2020, the number exceeded 25 thousand, with a growth rate of 70%. In 2020, the scale of China's cosmetics market reached $ 50.288 billion and $ 54.4 billion in January-November 2021, with a growth rate of 15.3%. Recent years have witnessed the continuous development of domestic cosmetics by virtue of the live streaming e-commerce and the gradually complete industrial chain behind it. Therefore, the new generation of Chinese fashion cosmetics brands is dominating the major market of domestic cosmetics. Such as the Chinese-element-oriented beauty brand Florasis is one of the brands gaining popularity through live streaming marketing, offering a unique design, lipstick with decorative carved pattern, and love lock-style packaging that capture the hearts of the young generation. In fact, not just niche European and American brands are facing mounting challenges in China. LVMH's beauty brand Benefit Cosmetics and Japanese beauty brand KATE have all had their counters removed from the Chinese market, and even the former beauty giant Maybelline recently announced the closure of all its offline stores in China. According to Euromonitor, Maybelline boasts the largest market share in the Chinese beauty market for years, and has remained so from 2011 to 2020. The ranking of Chinese beauty brands has changed since 2021, with Florasis's market share ranking top and Maybelline falling to sixth place. In recent years, China's beauty industry has recorded a rapid development, the transaction scene is moving from offline to online, which on one hand drives the growth of digital new retail sales. On the other hand, short video, livestreaming marketing, social e-commerce, and online and offline highly marketing models of high integration have become the inevitable trend. Overseas brands need to deal with the pressure from the rise of China's local brands, and also dissect the trend of Chinese consumers to gain better access to the Chinese market.

Abstract: In the first half of this year (2022 H1), China's cosmetic retail sales totals 190.5 billion yuan, down by 2.5% year-on-year, and the beauty market is still going downwards.According to CHAILEEDO, as of the first half of this year, 15 beauty brand have declared shutdowns or have shown signs of "beating a retreat".

Abstract: After about half a year, Xiaohongshu once again hit the brand with a heavy blow and set off a heated discussion in the industry.

Abstract: Recently, L'Oréal Group's beauty brand Maybelline plans to all offline stores in China. Its future sales channels will be transferred to online platforms including Tiktok China, Pingduoduo, Taobao, and WeChat Mini Program, with offline channels retaining only Watsons's counter. News on July 26th claimed that Maybelline would close all its offline stores in China, and its customer service staff confirmed to CHAILEEDO that it was notified of the brand's closedown on offline counters in succession. "In response to changes in market and consumer demand, Maybelline has been on a gradual strategic transformation since 2020 towards the traditional offline channels, aiming to create online-offline interactive experience stores to offer consumers a diversified shopping experience. Going forward, the brand will step up its effort to produce products of more competence and better quality." according to its official statement. This is another case where L'Oréal's beauty brand has withdrawn its offline stores in China, with YUESAI making the precedent. Maybelline entered the Chinese market in 1995, then was acquired by L'Oreal in the following year, and this year marks the 27th year of its establishment in China. Once hailed as "the No.1 Beauty Brand", it has gained its foothold in the Chinese market. As early as 2018, Maybelline received close attention as it withdrew from the supermarket channel and by 2020 it further quit department store channel. " Amid the rapid growth and constant changes in the beauty market, Maybelline is also in a critical juncture of transformation." all-domain retail general manager of L'Oréal China's mass-market cosmetics division Lin Xiao suggested. When Maybelline first entered the Chinese market, it was positioned as a mass consumer goods producer, thus focusing its layout on mainstream channels like supermarkets and department stores. Now the decision to withdraw from offline services is closely related to the sales channel reform caused by the general decline of entity store customers and high charges such as settling fees, bar code fees, and numerous factors. Not just Maybelline suffers from slipping offline sales, but all the players within the Chinese cosmetics market are registering higher online sales than offline ones. According to a report from the Qianzhan Industry Institute, the proportion of offline cosmetics sales is on the decline. Euromonitor's data shows that offline sales channels are predominance across the world from 2011-2020. But recent years have seen a rapid development of the online channels for global cosmetics, thus threatening offline channels. And the pandemic's outbreak in 2020 further accelerated the process, with the proportion of offline channels being 24.8% and online channels taking up 74.4%. On the other side, the rapid rise of Chinese beauty brands also threatens to take over more market shares abroad owned by Maybelline and other established brands. From 2015 to 2019, Maybelline was the No. 1 brand in market occupancy across the Chinese beauty market, according to a report by market analyst CTR Market Research. However, under intensifying competition in the mass beauty market, Maybelline's market share has dropped from 30.9% to 23.3% year by year. Despite the pandemic in 2022 leads to decline of the overall consumption of the beauty industry to some degree, the Chinese beauty brands maintain a decent performance overall. Data from MKTINDEX that during the pre-sale period of Chinese 618 Shopping Festival, L'Oréal's professional beauty brand 3CE won the first place with sales of more than $ 21 million. Florasis was taking the lead in Chinese beauty brands with sales of nearly $ 21 million, and Timage, Colorkey are also among the top10 list, and Maybelline ranks 14th with $ 7.5 million. The rise of China's beauty brands is inseparable from the emergence of new cosmetic products and mounting e-commerce tracks. The Chinese brands aims at e-commerce channel for overseas brands in the first place, taking the advantage of the the online market. Even some beauty brands started only with online channels such as Perfect Diary, Judydoll. Most of the Chinese beauty brands come from content-oriented social e-commerce platform, setting foot in Xiaohongshu, Bilibili and cooperating with the beauty blogger by video link to gain an in-depth look to the livestreaming field, as well as joining hands with KOLs through livestreaming. It is reported that strategic adjustment is all about promoting sales. In addition to Watson's counter, Maybelline will turn its sales to Tiktok China, Pingduoduo, Taobao, WeChat Mini Program, and other online channels. Amid fierce competition, abandoning offline stores and operating in the Chinese market more flexibly may fare better for Maybelline.

Abstract: L'Oréal has announced its half-yearly results for 2022. In the first half of 2022, the L'Oréal Group achieved a new record performance in five years. CHAILEEDO learned that the financial data show that as of June 30, 2022, the L'Oréal Group achieved sales of $18.8 billion, up 13.5% year-on-year. Overall, operating profit increased by 25.3% to $3.837billion and amounted to 20.4% of sales. According to the earnings data, North Asia has become the L'Oréal Group's top market, achieving sales of about $39.2 billion. Among them, the beauty market in mainland China was more severely affected by the epidemic at the beginning of the second quarter, but L'Oréal Group said it achieved double-digit growth in June. In terms of operating costs, the L'Oréal Group's R&D expenses, advertising and promotion expenses, and general and administrative expenses all decreased as a percentage in the first half of 2022. Among them, L'Oréal Group's advertising and promotion expenses amounted to $40.8 billion in the first half of the year, accounting for 31.5% of total sales, which is slightly lower than the level of around 40% of Chinese beauty listed companies. By division, the L'Oréal Group's Luxe Division, Mass Cosmetics Division, Professional Hair Products Division and Active Health Cosmetics Division all recorded significant growth in the first half of 2022. Of these, the Active Health Cosmetics Division led the way with a 20.9% growth rate, recording sales of approximately $2.6 billion. L'Oréal said that the division's growth rate was boosted by enhanced collaboration with medical professionals. It is reported that on the 16th Skincare Day on May 25 this year, L'Oréal joined hands with authoritative experts from the Chinese Dermatologists Association(CDA) and the Chinese Society of Clinical Oncology (CSCO) for the first time to start La Roche-Posay “Blue Ribbon” Caring For Cancer Patients’ Adverse Skin Reaction Health Summit. It hoped that through the interdisciplinary communication between dermatology and oncology, it could guide the public to pay attention to the skin health problems of tumor patients and provide practical solutions to skin problems. The L'Oréal Group's Luxe Division became the number one business unit of the L'Oréal Group, achieving sales of approximately $7.02 billion in the first half of this year, up 16.4% year-on-year.The Division outperformed in all three of its categories. The super-premium brands Lancôme Absolue and Helena Rubinstein drove the growth in skincare along with the newly acquired brands Takami and Youth to the People. In fragrances, the Division grew by +35%; global mainstays such as Libre by Yves Saint Laurent and Born in Roma by Valentino were powerful growth drivers. Driven by the success of Maison Margiela and Armani Privé, the Collections segment is booming and showing strong potential. Yves Saint Laurent and the category specialists Shu Uemura and Urban Decay grew significantly faster than the market, which continued to be dynamic. The mass cosmetics division, on the other hand, ranked fourth among the four divisions with an 8% growth rate, but still contributed about $6.9 billion in sales. Within the division, makeup brands saw the fastest sales growth with brands NYX and Maybelline New York making major contributions. In skincare, even though product deliveries were affected by the blockade in Shanghai at the beginning of the second quarter. L'Oréal Paris brand was still firmly in the driver's seat, topping the number one beauty brand position in the just-passed Tmall 618. It is worth mentioning that 2022 is the 25th anniversary of the establishment of L'Oreal China, and the L'Oreal Group has made a lot of moves in China in the first half of this year. In May this year, L'Oréal China also signed a contract with Oriental Beauty Valley and announced the establishment of Shanghai Meicifang Investment Co. This is the first investment company set up by L'Oréal since it entered the Chinese market and makes L'Oréal China the first branch of the Group to set up an investment company. In July this year, L'Oréal Group gathered in Hainan, China with its strong portfolio of historic and high-end luxury brands, bringing PRADA perfume and TAKAMI to make their debut in Hainan travel retail business while Lancôme brand was also presented in the French Pavilion. Looking to the future, Nicolas Hieronimus, L'Oréal Group CEO said that after two years of the impact of the epidemic, which also confirmed the desire of consumers for innovative and superior beauty products, the L'Oréal Group also remains optimistic about the prospects of the global beauty market. In July this year, he publicly expressed his expectations: "I believe that in the near future, China will certainly become the world's largest cosmetics market and L'Oréal's largest market."

Abstract: Alibaba, together with 19 consumer goods companies such as L'Oreal, P&G and Unilever, released the Guide on Carbon Reduction Friendly Action. It is committed to achieving carbon peaking and carbon neutrality goals in everyone’s daily life.

Abstract: Some of the beauty brands attract attention with " Store Closing Sale" and other keywords, but they are probably suspected of false marketing.

Abstract: Face makeup online sold $5.5 billion as of June 2022 MAT (July 2021-June 2022 rolling year).

Abstrcat: TikTok China beauty achieved growth against downturn in the first half of 2022. Sals of some brands such as Whoo,OSM, KANS and others on TikTok has exceeded the sales on Chinese traditional e-commerce platform Tmall.

Abstract: Over the past few years, China's online sales channel has brought huge traffic and growth momentum to Chinese as well as international beauty brands. With the traffic dividend peaking and the increasing beauty brands entering, the beauty market has stepped into the buyer’s market. Major brands are seeking new growth points.